4 reasons why better cash flow should be your Lunar New Year wish

Lunar festivities are happening around Australia and many businesses are focussed on all of the opportunities that 2018 has to offer. If you've a wish to make, should better cash flow be your target for the next 12 months?

Figures from finder.com.au show that three out of five Australians fail to achieve their resolutions each year. However, we've found some statistics that may encourage you to stick to your cash flow pledges in 2018.

1. Cash flow causes 46 percent of insolvencies

Unfortunately, inadequate cash flow is the number one reason for business insolvencies in Australia.

In the 2015-16 financial year, 46 percent of organisations listed this as their reason for failing, according to the Australian Securities & Investments Commission.

2. Over half of SME owners stressed over late payments

Unpaid invoices don't just take a financial toll on businesses. An MYOB survey found that 52 percent of SME owners suffered from stress and anxiety due to late payments.

More than one-third of respondents also said cash flow was having an impact on their personal finances.

3. 14 percent of small businesses owed over $100,000

Big businesses often use smaller organisations as an interest-free bank by failing to settle their debts in a reasonable time, the Australian Small Business and Family Enterprise Ombudsman claimed earlier this year.

The organisation said nearly half of small firms are owed over $20,000, while 14 percent are waiting to receive more than $100,000 each.

4. Just 12 percent of ASX companies pay on time

Continuing the big business theme, Illion data showed that only 12 percent of companies listed on the Australian Securities Exchange settle their invoices on time.

Start-ups and smaller businesses seem to take the brunt of the damage; the research revealed companies aged between two and five years are the most at risk of late payments and insolvency.

How to tackle late payments in 2018

These statistics may not fill fill you with cheer at first glance, but forewarned is forearmed and you can overcome potential cash flow hurdles with effective payment management policies. This will ensure your business is well prepared for the challenges and opportunities of 2018 and beyond.

If you'd like to discuss how debtor finance could be a part of your cash flow prevention strategy for next year, please get in touch with a member of the Classic Funding Group team today.